Phase II of the President's New Economic Policy will not be an "unfreezing" of wages, prices, and rents.
President Nixon on nationwide television last night called for voluntary wage-price restraints to replace the 90-day freeze on wages, prices, and rents that expires at midnight on Nov. 13, but announced the formation of a tripartite board with the legal authority to enforce restraint where necessary.
The Cost of Living Council (CLC), chaired by Treasury Secretary John B. Connolly, will develop wage-price "yardsticks" and set over-all policies, goals and objectives to be administrated by a Price Commission, a Pay Board, and a Government Committee on Interests and Dividends.
Nixon said he will ask Congress to extend until April 1973 the 1970 Economic Stabilization Act which gave him power to impose the wage-price freeze.
No restraint on profits and dividends will follow the 90-day freeze. "Higher profits are good for every person in America, but windfall profits are quite another thing," Nixon said. Without specifying any legal power of the Price Commission over profits, Nixon warned that "the commission's policy will be that business should pass a fair share of business swings to the consumer by cutting prices."
The goal of the Price Commission, which will be composed of members outside government, will be a drop in prices, Nixon said. "The time has come for a price-reduction psychology," he said.
The Pay Board, with a goal of stopping inflationary wage and salary increases, will draw its members from labor, management, and the public. Briefing newsmen before his speech, Nixon said that AFL-CIO president George Meany, United Auto Workers president Leonard Woodcock, and Teamsters president I.W. Abel would be members of that board.
The Government Committee on In- terest and Dividends will be chaired by Arthur Burns, chairman of the Federal Reserve System. The President said he will ask Congress for "stand-by controls over interests and dividends" within the next week.
"The United States needs interest rates as low as possible to stimulate non-inflationary investment," Nixon said.
Calling for public cooperation, Nixon said wage, price, and rent restraints under the three boards will be administered "not by an army of bureaucrats, but by an army of volunteers."
The Cost of Living Council currently has a staff of about 4500 people, most of whom were borrowed by other government agencies.
Nixon said that Phase II of his economic policy will permit some adjustment in wage and prices. "We will concentrate on the major portions of the economy that are the primary causes of inflation," he said, but added that the boards' legal authority will extend over the whole economy.
Nixon said wage-price controls will not be a permanent part of his economic policy, but gave no hint as to when they might be eliminated.
"We will depend on voluntary cooperation," Nixon said. But he warned that the government will not let the "selfish interests of a few" threaten the country's economic welfare.
"What is best for all of us is best for each one of us. The coming year could be the first time of prosperity during peace in 25 years," the President said